Blue Chip Company Sells Gears for $9 Per Unit An Order to Purchase 4,000 Gears Was Recently Received from Unit

Multiple Choice

Blue Chip Company sells gears for $9 per unit. The unit cost of each gear follows: $\begin{array}{lr}\text { Direct materials } & \$ 1.50 \\\text { Direct labor } & 2.20 \\\text { Manufacturing overhead } & \underline{2.10} \\\text { Total } & \$ 5.80\end{array}$ An order to purchase 4,000 gears was recently received from a new customer. There is enough capacity to fill the order and filling this order would not disrupt current operations. Blue Chip Company would incur an additional $1.80 per gear for shipping costs. Half of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced. In negotiating a price, how much is the minimum acceptable selling price?

A) $7.60
B) $5.80
C) $4.75
D) $6.55